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Richard H. Thaler Are What Distinguishes Economics Damental Weakness in the Method A Service of Leibniz-Informationszentrum econstor Wirtschaft Leibniz Information Centre Make Your Publications Visible. zbw for Economics National Bureau of Economic Research (NBER) (Ed.) Periodical Part NBER Reporter Online, Volume 1995 NBER Reporter Online Provided in Cooperation with: National Bureau of Economic Research (NBER), Cambridge, Mass. Suggested Citation: National Bureau of Economic Research (NBER) (Ed.) (1995) : NBER Reporter Online, Volume 1995, NBER Reporter Online, National Bureau of Economic Research (NBER), Cambridge, MA This Version is available at: http://hdl.handle.net/10419/62108 Standard-Nutzungsbedingungen: Terms of use: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Documents in EconStor may be saved and copied for your Zwecken und zum Privatgebrauch gespeichert und kopiert werden. personal and scholarly purposes. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle You are not to copy documents for public or commercial Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich purposes, to exhibit the documents publicly, to make them machen, vertreiben oder anderweitig nutzen. publicly available on the internet, or to distribute or otherwise use the documents in public. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, If the documents have been made available under an Open gelten abweichend von diesen Nutzungsbedingungen die in der dort Content Licence (especially Creative Commons Licences), you genannten Lizenz gewährten Nutzungsrechte. may exercise further usage rights as specified in the indicated licence. www.econstor.eu FAIL 1995 In This Issue Program Report: Program Report Monetary Economics 1 Research Summaries: The Role of Banks in the Transmission Monetary Economics of Monetary Policy 6 Behavioral Economics 9 Do Retirement Saving Programs Increase Saving? 13 N. Gregory Mankiw NBER Proflles 18 Conferences 19 The NBER Program in Monetary Economics, established in 1991, en­ Bureau News 26 courages practical research in macroeconomics with an emphasis on is­ Bureau Books 37 sues relating to monetary policy. Its goal is to promote a greater under­ Current Worlting Papers 39 standing of the relationship between central-bank actions and the econo­ my in order to help the world's central bankers better meet the formida­ ble challenges they face. Toward these ends, program members pursue a range of individual and collaborative research studies. Program members and their guests meet twice a year to present and discuss this research. In addition, members meet for one week during the NBER's Summer In­ stitute to present recent research and collaborate on research in progress. Central bankers regularly are invited to attend these meetings and discuss their recent decisions and concerns. Over the past several years, program members have heard from Federal Reserve Governors Lawrence B. Lindsey and Janet L. Yellen; then President of the Federal Reserve Bank of Boston Richard Syron; then Governor of the Bank of Canada John Crow; former President of the Bundesbank Helmut SchleSinger; and the Bank of England's Chief Economist Mervyn A. King, among others. In addition to regular program meetings and the Summer Institute, the monetary economics program sponsors occasional conferences to focus research on specific topics. I ran the last such conference, which pro­ duced a recently published University of Chicago Press ·volume entitled Monetary policy. Christina D. Romer and David M. Romer currently are organizing the next conference, which will focus on policymaking in low­ inflation countries. Research by program members is diverse. It includes empirical and theoretical work on the effects of monetary policy and the study of alter­ native policies and institutional arrangements. What follows is a brief de­ Scription of some avenues of research that program members have been pursuing over the past several years. NBER Reporter Fall 1995 The Effects of rter Monetary Policy ·NBERRep0 When the central bank changes • NATIONAL BUREAU OF ECONOMIC RESEARCH the quantity of money, what is the effect on the economy? Although this The National Bureau of Economic Research is a private, nonprofit research question is at the heart of mon­ organization founded in 1920 and devoted to objective quantitative analysis etary economics, the answer is nei­ of the American economy. Its officers and board of directors are: ther easy to obtain nor widely agreed upon. From a SCientific President and Chief Executive Officer-Marttn Feldstetn Director of Finance-Sam Parker point of view, the fundamental problem is that central banks do BOARD OF DIRECTORS not conduct controlled experi­ ments. If central banks randomized Chairman-Paul W. McCracken Vice Chairman-John H Btggs their actions, we could just observe Treasurer-Gerald A. Polansky what happened to the economy after these actions in order to see DIRECTORS AT lARGE their effects. But, in fact, central Peter Aldrich George C. Eads Robert T. Parry banks most often act in response Elizabeth E. Bailey Martin Feldstein Peter G. Peterson to actual, perceived, or anticipated John Herron Biggs George Hatsopoulos Richard N. Rosett Andrew Brimmer KarenN.Hom Bert Seidman events. Thus, researchers studying Carl F. Christ Lawrence R. Klein Kathleen P. Utgoff monetary policy confront the diffi­ Don R. Conlan Leo Melamed Donald S. Wasserman Kathleen B. Cooper Merton H. Miller Marina v. N. Whitman cult task of sorting out the effects Jean A. Crockett Michael H. Moskow John O. Wilson of central-bank actions from the causes of those actions. DIRECTORS BY UNIVERSITY APPOINTMENT Monetary economists have tried • George Akerlof, Calt/ornta, Berkeley Joel Mokyr, Northwestern to solve this problem in two ways. Jagdish W. Bhagwati, Columbta Andrew Postlewaite, Pennsylvanta One is to take a narrative approach William C. Brainard, Yale Nathan Rosenberg, Stanford Glen G. Cain, Wisconstn Harold T. Shapiro, Princeton to monetary history. This approach Franklin Fisher, MIT Craig Swan, Mtnnesota dates back at least to Milton Fried- Saul H. Hymans, Mtchtgan David B. Yoffie, Harvard Marjorie B. McElroy, Duke Arnold Zellner, Chtcago man and Anna]. Schwartz's classic treatise, A Monetary History of the DIRECTORS BY APPOINTMENT OF OTHER ORGANIZATIONS United States. This NBER-sponsored study examined in detail the causes Marcel Boyer, Canadtan Economics Assoctatton Mark Drabenstott, American Agricultural Economtcs Assoctatton and effects of major monetary William C. Dunkelberg, Nattonal Assoctatton of Bustness Economists changes over the previous century, Richard A. Easterlin, Economic History Assoctatton Gail Fosler, The Conference Board with an emphasis on historical and A. Ronald Gallant, American Statistical Assoctatton institutional detail. More recently, Robert S. Hamada, American Ftnance Assoctatton Charles lave, American Economtc Assoctatton Romer and Romer have extended Rudolph A. Oswald, American Federatton ofLabor and Congress this narrative approach. They used ofIndustrtal Organtzattons Gerald A. Polansky, American Instttute of Certf/ied Public Accountants the minutes of Federal Open Mar- Josh S. Weston, Commttteefor Economic Development ket Committee meetings to pin- point dates at which the Fed Contributions to the National Bureau are tax deductible. Inquiries concerning changed policy toward a tougher contributions may be addressed to Martin Feldstein, President, NBER, 1050 Massachusetts Avenue, Cambridge, MA 02138-5398. stance on inflation. The Romer and The Reporter is issued for informational purposes and has not been reviewed Romer dates, as they have come to by the Board of Directors of the NBER. It is not copyrighted and can be freely be called, provide one concrete al- reproduced with appropriate attribution of source. Please provide the NBER's Public Information Department with copies of anything reproduced. beit controversial method for study- Preparation of the NBER Reporter is under the supervision of Donna Zerwitz. ing the effects of changes in mone- Requests for subscriptions, changes of address, and cancellations should be tary policy.! sent to Reporter, National Bureau of Economic Research, Inc., 1050 A second way of trying to disen­ Massachusetts Avenue, Cambridge, MA 02138-5398. Please include the cur­ rent mailing label. tangle the causes and effects of • 2. NBER Reporter Fall 1995 monetary policy is to take a more equilibrate the demand for money There remains considerable con­ econometric approach. That is, with the reduced supply. Higher troversy about how much this new rather than relying on a careful interest rates, in turn, reduce in­ lending view adds to our under­ reading of history, one can study vestment, as the higher cost of bor­ standing of the monetary transmis­ the effects of monetary policy by rowing discourages some potential sion mechanism. Various questions applying time-series analysis to investors. In addition, higher inter­ remain open to dispute. When bank macroeconomic data. To make this est rates depress asset values, such lending falls after a monetary con­ approach work, some identifying as the prices of equities, which re­ traction, as indeed it does, how assumption is necessary to sort out duces household wealth and con­ much of the fall is attributable to cause and effect. One might as­ sumer spending, Thus, when the reduced supply because of the fall in sume, for instance, that changes in central bank reduces the money reserves and how much
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